Llewelyn S. Simpson, Relator, vs. Precision Coatings, Inc., Respondent, and Commissioner of Economic Security, Respondent.

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480 A. 08, subd. 3 (1996).

STATE OF MINNESOTA
IN COURT OF APPEALS
C0-98-3

L.B.I., Inc.,
Appellant,

vs.

B & D Pump, Inc., defendant and third-party plaintiff,
Respondent,

Mississippi Transport, Inc., et al.,
Third-Party Defendants.

Filed September 8, 1998
Reversed and remanded
Schumacher, Judge
Dissenting, Kalitowski, Judge

St. Louis County District Court
File No. C495601215

Clayton D. Halunen, Talarico & Halunen, Ltd., 313 North Central Avenue, Duluth, MN 55807 (for appellant)

Gerald J. Brown, Brown, Andrews, Signorelli & Zallar, P.A., 300 Alworth Building, 306 West Superior Street, Duluth, MN 55802; and

Timothy Downs, McDonald & Downs, 200 Alworth Building, 306 West Superior Street, Duluth, MN 55802 (for respondent)

Considered and decided by Schumacher, Presiding Judge, Randall, Judge, and Kalitowski, Judge.

U N P U B L I S H E D   O P I N I O N

SCHUMACHER, Judge

Appellant L.B.I., Inc. is the owner of a gas station and sued respondent B & D Pump, Inc., alleging negligence, breach of contract, and breach of implied warranty of fitness. L.B.I. contends the trial court erred in granting a directed verdict for B & D Pump on all claims. We reverse and remand for trial.

FACTS

L.B.I. presented these facts in its case-in-chief at trial. In 1993, L.B.I. requested the services of B & D Pump to build a storage and dispensing system for a new gasoline station that L.B.I. was building near its antique mall. L.B.I.'s property tested clean during a ground test that was a prerequisite to receiving a loan to purchase the property.

B & D Pump specializes in the design, installation, and maintenance of gasoline storage and distribution systems. It designed an underground storage system and selected all necessary equipment and components for L.B.I. During excavation, however, L.B.I. realized that the water table was too high to install underground gasoline storage tanks. B & D Pump then designed and installed above-ground tanks.

The Petroleum Equipment Institute (PEI) is the organization that sets industry standards for petroleum equipment. In 1990, it published a treatise on proper storage tank valves in which it stated that vent float valves were engineered for underground, gravity-filled gasoline storage tanks and were not to be used on above-ground pressurized gasoline storage tanks. B & D Pump installed vent float valves in L.B.I.'s above-ground tanks.

Shortly after L.B.I.'s gas station opened, delivery tankers had difficulty filling the storage tanks and complained that the tanks could not take the full force of the gas pressure during filling and that filling at full force would cause the pressure to rise to such an extent that gasoline would burst out of the rooftop overflow pipe, spray down like rain, and form puddles on the roof of the antique mall. In addition, a leak erupted at the fill valve where the delivery tankers connected their hoses.

Between May and August 1994, when B & D Pump appeared to have fixed the problems, L.B.I. had received 19 deliveries of gasoline and had, on several occasions, discovered discrepancies between the amount of gasoline delivered into the storage tanks and the amount that the transporter had pumped out. The discrepancies were as much as 40-60 gallons per delivery. L.B.I. believed these extra gallons of gasoline were being lost through the overflow valve and through leakage from the storage system.

Shortly after the filling problem was resolved, L.B.I. began receiving complaints from consumers, employees at the gas station, and people from the neighboring antique mall that a very strong gasoline odor was making people sick. In October 1994, the Minnesota Pollution Control Agency (MPCA) and a crew of environmental engineers investigated the site and performed soil boring tests on the block of and surrounding area of the gas station to determine the possible source of the contamination. The MPCA discovered standing gasoline in the sump. From the soil borings, the MPCA excluded the neighboring gas station as a source of contamination and excluded the possibility that the contamination was caused by patrons spilling gas as they filled the tanks of their automobiles. A hydrologist for the MPCA determined the soil samples contained fresh gasoline and showed the highest concentration near the tanks and the station. Based on the chemical analysis from the soil boring samples, the MPCA concluded that the gasoline storage tanks were the source of the gasoline leakage into the soil.

At the close of L.B.I.'s case, all defendants moved for a directed verdict. The trial court granted the motion. L.B.I. appeals.

D E C I S I O N

When reviewing a directed verdict, this court makes an independent determination whether the evidence was sufficient to present a fact question to the jury. Nemanic v. Gopher Heating & Sheet Metal, Inc., 337 N.W.2d 667, 669 (Minn. 1983). A directed verdict is warranted only when, in light of the evidence as a whole, the trial court would have a duty to set aside a contrary verdict as manifestly contrary to the evidence or the law. Claflin v. Commercial State Bank, 487 N.W.2d 242, 247 (Minn. App. 1992), review denied (Minn. Aug. 4. 1992). The court must accept as true the evidence, and all reasonable inferences that can be drawn from it, in favor of the party against whom the directed verdict is sought. Id.

1. L.B.I. contends the trial court erroneously directed a verdict on the basis that L.B.I. had failed to present a fact question on negligence. Given that the transaction between L.B.I. and B & D Pump is a hybrid contract of a sale of goods and services, and that L.B.I.'s primary complaint is with B & D Pump's design and installation of the storage tanks, we conclude that analysis of the common law negligence claim is most appropriate. See McCarthy Well Co. v. St. Peter Creamery, Inc., 410 N.W.2d 312, 315 (Minn. 1987) (in case of hybrid contract for goods and services, court analyzes case according to predominant purpose of transaction).

The basic elements of a negligence claim are: duty; breach of duty; breach is proximate cause of injury; and injury. Hudson v. Snyder Body, Inc., 326 N.W.2d 149, 157 (Minn. 1982). A party must also show the risk at issue was reasonably foreseeable. Lovejoy v. Minneapolis-Moline Power Implement Co., 248 Minn. 319, 326, 79 N.W.2d 688, 693 (1956). It is well established that questions of negligence, proximate cause, and foreseeability are for the jury to determine. See Lundgren v. Fultz, 354 N.W.2d 25, 28 (Minn. 1984) (foreseeability); Ponticas v. K.M.S Investments, 331 N.W.2d 907, 915 (Minn. 1983) (proximate cause); Smith v. Carriere, 316 N.W.2d 574, 575 (Minn. 1982) (negligence).

As a contractor, B & D Pump had a nondelegable duty to use due care when performing its contract for L.B.I. Brasch v. Wesolowsky, 272 Minn. 112, 117, 138 N.W.2d 619, 623 (1965); Julian Johnson Constr. Corp. v. Parranto, 352 N.W.2d 808, 810 (Minn. App. 1984); see also Arden Hills North Homes Ass'n v. Pemtom, Inc., 475 N.W.2d 495, 500 (Minn. App. 1991) (construction contractor has duty to build in reasonably good and workmanlike manner), aff'd as modified, 505 N.W.2d 50 (Minn. 1993).

L.B.I. introduced documentary and testimonial evidence that set forth the industry standard for proper valves in an above-ground gasoline storage tank system. The uncontroverted evidence showed that B & D Pump installed the wrong valve, contrary to industry standards. See Schmidt v. Beninga, 285 Minn. 477, 489-90, 173 N.W.2d 401, 408 (1970) (although failure to observe industry standard is not per se lack of care, evidence of business customs is admissible to show what reasonably prudent tradesperson would do in similar situation). Therefore, we conclude L.B.I. presented sufficient evidence to show that B & D Pump failed in its duty of care.

L.B.I. also presented testimony demonstrating pressurization problems in the storage tanks, slow gas delivery, gas leaks in the sump and at the camlock, gas spraying from the overfill pipe, and unaccounted-for gallons of gasoline at delivery. Most significantly, L.B.I. presented evidence that the MPCA determined the storage tanks were the source of the gas leak into the soil.

Viewing this evidence, as we must, in the light most favorable to L.B.I., the record has raised a question of negligence on the part of B & D Pump. At the very least, the evidence is not so clear as to preclude a question of fact. Rather, L.B.I. has raised a question as to whether B & D Pump did, in fact, act negligently, breach its duty of reasonable care when designing and installing the gasoline storage system, and damage L.B.I.

2. L.B.I. next contends the trial court erred when it failed to apply the doctrine of res ipsa loquitur. Res ipsa loquitur has three elements: the tortious event must not generally occur unless through someone's negligence; an instrumentality within the exclusive control of the defendant caused the tortious event to occur; and the plaintiff's voluntary action or contribution did not in any way cause the tortious event to occur. Leuer v. Johnson, 450 N.W.2d 363, 364 (Minn. App. 1990), review denied (Minn. Mar. 16, 1990). The trial court held that the elements of causation and control were not met here. We disagree.

The record contains expert evidence that the storage tanks had been the source of the gas leak, based on the soil boring samples the MPCA retrieved and analyzed. PEI and MPCA evidence showed the improper valves caused over-pressurization in the tanks that resulted in flow and fill problems. The record also shows B & D Pump had exclusive control of the storage tanks because it was the sole outfit installing, repairing, and maintaining them.

Finally, the record contains evidence that L.B.I. did not cause this gas contamination. See id. (event must not have been due to any voluntary or contributing act of plaintiff). L.B.I. testified that ground tests before purchase showed the land clear of any contamination. Further, the MPCA soil tests did not show high concentrations of gasoline near neighboring properties whereas the tests were high at the site of the gasoline storage tanks.

Gross gasoline leakage from storage tanks into the environment generally should not occur absent someone's negligence. See id.; see also Mahowald v. Minnesota Gas Co., 344 N.W.2d 856, 863-64 (Minn. 1984) (finding reversible error where court failed to give res ipsa loquitur instruction in case involving natural gas leak and explosion; holding it "justifiable" to infer fault on gas company because, ordinarily, gas does not escape from its lines). By its very nature, a gasoline storage tank ought to hold the product and not leak. Cf. Manning v. St. Paul Gaslight Co., 129 Minn. 55, 57, 151 N.W. 423, 424 (1915) (holding res ipsa loquitur applied to gas company where gas pipe broke underground and leaked). The tank ought to be designed and constructed to withstand refilling without spraying or leaking gasoline.

The evidence in the record raised a fact issue sufficient to warrant presenting the question of res ipsa loquitur to the jury. As the supreme court has noted: "[T]he legal doctrine of res ipsa loquitur is to be considered as a form of circumstantial evidence" that gives the plaintiff the benefit of its natural probative force at the close of evidence. Mahowald, 344 N.W.2d at 864.

Res ipsa loquitur creates a permissive inference of negligence but does not compel it. It does not shift the burden of proof. It simply gets the matter to the jury under an appropriate instruction.

Id. This case contained sufficient evidence to meet the elements. The trial court erred in failing to apply res ipsa loquitur here.

3. L.B.I.'s claim for breach of implied warranty of fitness would only arise under the Uniform Commercial Code (UCC) in a transaction for the sale of goods. As we have already discussed, the transaction here was predominantly a sale of services, governed by the common law of negligence rather than the UCC.

L.B.I. contends that it raised fact issues on its breach of contract claim to withstand a directed verdict. To prevail on a breach of contract claim, the plaintiff must show the formation of a contract; the plaintiff's performance of any conditions precedent to its right to demand performance from defendant; and the defendant's breach of the contract. Industrial Rubber Applicators, Inc. v. Eaton Metal Prods. Co., 285 Minn. 511, 513, 171 N.W.2d 728, 731 (1969) (involving action for breach arising out of contract for rubber work needed on taconite plant), overruled on other grounds by Standslast v. Reid, 304 Minn. 358, 231 N.W.2d 98 (1975). The plaintiff must also show that the breach caused damages. Nguyen v. Control Data Corp., 401 N.W.2d 101, 105 (Minn. App. 1987). The trial court here found that L.B.I. failed to show causation.

L.B.I. based its case on the fact that its land is now contaminated from gasoline leakage from the tanks B&D Pump installed. As a result of the breach, which is the failed storage system, L.B.I. now may have to incur clean-up expense. The case has raised a palpable issue of fact for a jury to consider: was there a breach of contract by B&D Pump when it delivered the storage tanks with the vent float valves?

4. In its brief, L.B.I. argues the trial court erred by "eliminating evidence of damages" at trial. Admission of evidence rests within the trial court's discretion and will not be overturned absent an abuse of discretion. State v. Washington, 521 N.W.2d 35, 41 (Minn. 1994). At trial, L.B.I. alleged that the gasoline fumes caused a reduction in L.B.I.'s business and made it difficult to find new tenants for the antiques complex. The court properly struck L.B.I.'s erroneous calculations and admitted the remainder of the exhibit that listed claimed damages from the loss of the lease for Orchards Restaurant. Other than that exhibit, L.B.I. has not alleged any other specific error. On this record, we conclude that no abuse of discretion has occurred.

Reversed and remanded.

KALITOWSKI, Judge (dissenting).

I respectfully dissent. The record supports the district court's determination that the evidence presented at trial was insufficient to sustain a verdict for appellant L.B.I. Therefore, the district court properly entered a directed verdict in favor of respondent B & D Pump.

In its order granting the motion for directed verdict, the district court found that there was never any direct evidence presented or "proof adduced as to what caused the accident other than it was gasoline." Indeed, L.B.I. acknowledged its inability to produce any direct proof of negligence on the part of B & D Pump and, thus, were forced to rely on the theory of res ipsa loquitur to prove their case. At the conclusion of the presentation of all the evidence, the district court found:

There was no evidence that a substantial amount of gasoline got out of the tanks, or where it came from. There was no evidence that the tanks or the gasoline [were] in the exclusive control of the Defendant. Finally there was no evidence that the condition - the gas spill - was not due to the conduct of Plaintiff or some third person. The elements to submit res ipsa loquitur instructions to the jury are therefore lacking.

The district court correctly found that, based on the evidence in the record, a jury verdict for L.B.I. could not be sustained where both direct proof of causation and the required elements of res ipsa loquitur were lacking. I would affirm the district court.